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The Green Deal

European Union's ETS System and Potential Application of CBAM

The European Union is quite decisive to reach in their target of being climate neutral: "Net Zero" by 2050. Along with those aims, several instruments are being used. Nowadays Emission Trading System (ETS) and Carbon Border Adjustment Mechanism (CBAM) are hot topics for the international business partners of EU.

Emission Trading System or as know as Cap and Trade, is active since 2005. A cap set for free allowances of carbon emissions is being decreased step by step every year. In case of less emission than the given allowances, companies are permitted to sell the extra emissions they have. Missing amount of ETS carbon credits are being bought from the ETS entity where the country in question is bound.

While imposing financial burden to organizations in member countries, imported materials which have origin other than EU does not bear the same financial responsibilities. That's why EU decides to impose the Carbon Border Adjustment Mechanism to bring a balance to the free trading environment. Basically, the purpose of both applications is that "Polluters Pay" no matter where the origin of the materials is.


Otherwise, EU faces another circumstance which is called carbon leakage, where buyers prefer cheaper materials since the origin country does not have such policies or producers move their production facilities to less regulated regions.

Now countries that do not have an emission trading system have to choose a path to their green futures.

First alternative is the ETS. They may simply join EU's Emission Trading System or they may establish a EU ETS compliant system themselves.

Second alternative is doing nothing and being subject to the Carbon Border Adjustment Mechanism (CBAM) where importers pay tax to items from the countries which do not have an ETS system compliant to EU's.

Resorsus's Green Deal Advisory Program

We examine your organization and prepare a tailor-made advisory package for your company depending on its size, industry and international trading locations. We cover the following articles and more:

  • Regulations of EU ETS and CBAM potential applications by countries.

  • Net Zero studies

  • Trending technologies and potential suppliers

  • Setting Climate Policies and Green Procurement Policies to organizations.

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